Poverty wages

December 18, 2013 —

Recently, more than 100 U.S. cities have seen protests by fast food workers demanding a living wage. They are among the poorest paid workers in the country. Almost 60% of U.S. minimum-wage workers are in food service or sales. Farm workers and homecare aides also join the ranks of the lowest paid.

For these ten corporations, the average hourly wage is between $7.25 (today’s federal minimum wage) to just under $10 an hour. At $7.25 an hour, 40 hours a week/52 weeks a year, a worker will gross $15,080. If you have to support more than yourself on this wage, you are officially poor.

This year, momentum has been building to raise the minimum wage. In November, New Jersey voters approved a hike from $7.25 to $8.25 effective in January. Voters in SeaTac, WA approved $15 an hour. Currently, campaigns are on in 10 states, plus the District of Columbia. On Capitol Hill, a “Fair Minimum Wage Act of 2013” has been introduced proposing $10.10 an hour by 2015 (in three 95-cent increments), with a cost-of-living adjustment proposed to kick in in 2016. Last week a new poll showed 63% of Americans favor a $10.10 federal minimum wage.

We at The River Reporter believe the time has come for a decent minimum wage that does not leave gainfully employed workers to live in poverty.

One of the most eye-opening news stories of the recent Thanksgiving holiday was how a Wal-Mart store near Canton, OH put out food collection bins with this sign: “Please donate food items here, so associates [Wal-Mart clerks] in need can enjoy Thanksgiving dinner.” A Wal-Mart spokesman pointed to this as evidence of “the company’s culture to rally around associates and take care of them when they face extreme hardships.” Low-paid Wal-Mart workers, however, see it as proof of inadequate wages.

Not only is a decent minimum wage the right thing to do for our lowest-wage workers, but also for taxpayers. In Illinois, for example, where the minimum hourly wage is $8.25, the state has documented that its fast food workers cost Illinois taxpayers $368 million in public assistance annually (www.progressillinois.com/posts/content/2013/10/15/low-wage-fast-food-job...[1]). And there’s the rub: profitable corporations count on us, the taxpayers, to subsidize their lowest paid employees, so that stockholders and corporate executives can reap good earnings. We live under an economic system where the profits are privatized and the costs are socialized, i.e. society at large helps pick up the tab.

The federal minimum wage, created in 1938, rose fairly steadily for decades, reaching its peak buying power in 1968. It might amaze you to learn that the 1968 minimum wage of $1.60 would be $10.74, adjusting for inflation in 2013 dollars—well more than the current federal minimum. Meantime, despite wages that have not kept pace, economic output per capita, adjusted for inflation, has doubled since 1969, helping companies’ profits through increased productivity (static.cdn-seekingalpha.com/uploads/2013/12/5/saupload_Real-GDP-per-capita-since-1960-log.png). Last year, corporations, already fully recovered from the recession by 2010, reached all-time high profits in the third quarter of 2012, while during the same quarter, workers’ wages dropped to a record low.

It is time to invest in workers, who, if they were able to be more self-sufficient, would not need to turn so often for assistance from public funds. Furthermore, raising the purchasing power of our lowest paid workers would help not only them, but also would set a new bar for others who make more than the minimum and would benefit the economy at large by increasing consumer spending. A 2011 study by the Chicago Federal Reserve Bank finds that for every dollar increase in the minimum wage, that minimum-wage, hourly worker spends an additional $2,800 in consumer products for his or her household over the following year (www.chicagofed.org/digital_assets/publications/working_papers/2007/wp200...[2]).

Finally, an analysis by the Economic Policy Institute shows that “raising the federal minimum wage to $10.10 per hour and indexing it to inflation would generate more than $30 billion in new economic activity and support the creation of 140,000 new full-time jobs as businesses expand to meet increased consumer demand.” (www.epi.org/files/2013/bp357--federal-minimum-wage-increase.pdf[3])

As we see it, this is not about corporations being unable to come up with the funds to pay a decent minimum wage. It is about fairness. A system that keeps gainfully employed, fulltime workers in poverty and counts on taxpayers to make up the difference is not fair to those workers or to society. The time has come to raise the minimum wage from its current poverty level of $7.25.